The S&P 500 posted a new all-time high in January for the first time since late 2021. Hitting that new high marked the final step needed to confirm the bull market that began when the index bottomed in October 2022, after a brutal 24% plunge into bear territory.

The broader market is also benefiting from earnings season, with most American companies currently reporting their financial results for the fourth quarter of 2023 (ended Dec. 31). There has been a slew of positive results, particularly in the technology sector, which has buoyed investors' confidence.

Leading cybersecurity provider Tenable (TENB 0.49%) released its Q4 report following the market close on Feb. 6, and its stock immediately jumped 9% in after-hours trading. Here's why it's not too late for investors to buy shares of this cyber specialist.

Two smiling employees looking at a laptop computer inside a data center.

Image source: Getty Images.

Tenable is a leader in vulnerability management

Tenable's specialty is proactive cybersecurity -- specifically, vulnerability management. Its Nessus platform is the most widely deployed vulnerability management tool in the cybersecurity industry, with over 2 million individual downloads. It's also the most accurate, and it has more coverage than any competitor because it protects against over 82,000 common vulnerabilities and exposures.

Nessus actively scans devices, operating systems, and cloud networks in search of weak spots, so that an organization can rectify them before they are exploited by a malicious actor.

Tenable has used its success to expand into other segments of the industry. It now offers specific tools for cloud security, identity security, and attack surface management (which helps protect all internet-facing assets). The rise of cloud computing means more businesses are operating online than ever before, so they are exposed to threats that could stem from anywhere in the world and strike at any time of the day or night.

The cost of foregoing cybersecurity protection is surging because every industry, from banking to manufacturing, is reliant on the cloud. For example, 82% of car manufacturers have experienced at least four hours of unplanned downtime over a 12-month period -- at a cost of $22,000 per minute.

In late 2022, Tenable launched a new platform called Tenable One. It packages all of the company's best products to deliver a holistic solution for organizations operating online. In the Q4 conference call with investors, management said the platform is helping businesses consolidate their cybersecurity software; in other words, they are ditching fragmented stacks in favor of Tenable One's all-encompassing offering.

Management also said Tenable One already accounts for 20% of new contracts, so uptake has been rapid.

Large organizations are flocking to Tenable for their cybersecurity needs

Tenable has more than 40,000 business customers worldwide. In Q4, it added 597 new customers, an increase of 1.5%. Tenable told investors it added 156 new six-figure clients in the fourth quarter, taking that total to 1,721. That was a 21% year-over-year jump in the number of businesses spending at least $100,000 annually on its platforms.

In other words, the company is acquiring large, high-spending organizations at a much faster rate than regular customers, which shows how important cybersecurity has become for businesses with more complex operations.

These added customers drove Tenable's annual revenue to a record high of $798.7 million in 2023. That figure was up 17% compared to 2022, and it was comfortably above the company's prior forecast of $791.4 million.

Tenable's guidance suggests revenue could come in at $905 million in 2024, which would represent 13% growth compared to 2023. That is a deceleration, but the company is trying to reach profitability by managing costs, which means moderating its spending on growth-focused line items like marketing.

For example, Tenable's total operating expenses only rose 12% in 2023, a pace that's slower than its revenue growth. That allowed the company's net loss to shrink by 14% (to $78.2 million, down from $92.2 million in 2022).

With that said, after stripping out one-off and non-cash expenses, Tenable delivered non-GAAP net income of $97.1 million. Most analysts don't consider that to be "true" profitability, but it was an impressive 119% increase compared to 2022, so the company is definitely making progress.

Why Tenable stock is a buy now

As already mentioned, Tenable stock soared 9% immediately following its recent financial results. The company is now valued at $6.1 billion, and based on its $798 million in 2023 revenue, its stock trades at a price-to-sales (P/S) ratio of 7.6.

That is incredibly cheap compared to other stocks in the cybersecurity industry. CrowdStrike shares carry a P/S ratio of 25.5 -- that's 3 times higher than Tenable's P/S ratio. Palo Alto Networks stock trades at a P/S ratio of 16.2, making it twice as expensive as Tenable by that metric. CrowdStrike and Palo Alto are widely considered to be the leaders in the cybersecurity industry, and both companies are growing their revenue at a faster clip than Tenable (although Palo Alto's revenue increased by 20% in its latest quarter, so Tenable isn't far off the mark).

Despite Tenable forecasting slower growth in 2024, it has proven its ability to beat expectations, and it's inching closer to profitability as an added bonus. Plus, the company believes its addressable market will top $33 billion by 2027, so it has barely scratched the surface of its opportunity.

With those things in mind, I think Tenable should gradually close the P/S valuation gap with its peers, and that translates into upside in its stock price.